Legal Claims Against Directors

When can you bring a claim against directors?

Holding a director personally accountable requires specific legal grounds, as they are typically shielded from liability by the limited company structure. However, the law recognises that directors who act improperly or negligently must face consequences. Below are the key scenarios in which claims against directors can be pursued.

Breach of fiduciary duty

Directors are bound by fiduciary duties, requiring them to act in good faith, prioritise the company’s interests, and avoid conflicts of interest. A breach occurs when directors:

Use their position for personal gain at the expense of the company.
Make decisions that benefit themselves or third parties rather than the business.
Fail to disclose conflicts of interest in business transactions.

These breaches can have serious financial implications for creditors and shareholders, making legal action necessary to seek compensation.

Breach of statutory duties

Under the Companies Act 2006, directors are required to adhere to specific statutory duties, including:

Promoting the success of the company for the benefit of its members.
Exercising reasonable care, skill, and diligence in their roles.
Avoiding situations where their interests conflict with those of the company.

Failure to fulfil these responsibilities, such as neglecting to conduct due diligence or allowing poor financial management, can provide grounds for a claim.

Wrongful trading

Directors are prohibited from continuing to trade if they know, or should reasonably know, that the company is insolvent and cannot meet its financial obligations. Wrongful trading occurs when directors:

Accumulate further debts despite knowing the company cannot pay existing creditors.
Make poor financial decisions that worsen the position of creditors.

If proven, directors can be held personally liable for the debts incurred during the period of wrongful trading.

Fraudulent trading

Fraudulent trading involves deliberate dishonesty by directors to deceive creditors or conceal the company’s financial state. Examples include:

Fabricating financial records to present a healthier financial position.
Making false assurances to creditors to secure additional goods, services, or loans.

Unlike wrongful trading, fraudulent trading carries severe penalties, including personal liability and potential criminal sanctions.

Misuse of company assets or funds

Directors must ensure that company funds and assets are used solely for legitimate business purposes. Misuse includes:

Diverting funds for personal use without authorisation.
Selling company assets at undervalued prices to benefit themselves or others.
Failing to maintain proper records of transactions, making it difficult to trace irregularities.

Such actions can significantly harm creditors and shareholders, often necessitating legal action.

How Anthony Gold Solicitors can help you in claims against directors

Pursuing a claim against a director requires a strategic and evidence-driven approach. We provide expert legal guidance, ensuring that your claim is handled with professionalism and precision. Our team has extensive experience in these matters, offering tailored support to help you achieve the best possible outcome.

Investigating the director’s actions

The foundation of any successful claim is a thorough investigation into the director’s behaviour and decisions. Our solicitors meticulously review company records, financial transactions, board meeting minutes, and insolvency reports.

This allows us to uncover any breaches of fiduciary or statutory duties, instances of wrongful or fraudulent trading, or misuse of company funds. By carefully analysing the evidence, we build a strong case to hold directors accountable for their actions.

Providing tailored legal advice

Every case is unique, and we provide advice that is specific to your circumstances. We guide you through your options, including:

Seeking compensation for financial losses caused by the director’s misconduct.
Recovering misappropriated company funds or assets.
Initiating disqualification proceedings to prevent the director from holding similar positions in the future.

Our solicitors ensure that you fully understand your rights and the legal remedies available to you, empowering you to make informed decisions about how to proceed.

Negotiation & litigation expertise

Where possible, we aim to resolve disputes through negotiation. This can lead to faster resolutions and lower legal costs while still achieving your objectives. However, some cases require litigation, and we are fully equipped to represent you in court. From filing the claim to presenting evidence and advocating on your behalf, our team handles every aspect of the process, allowing you to focus on other priorities.

Achieving results that matter

Our ultimate goal is to recover what you are owed and ensure justice is served. Whether it’s compensation for financial losses, the recovery of assets, or holding directors accountable for unethical behaviour, we are committed to delivering results. We also prioritise protecting your interests and preventing further harm caused by negligent or fraudulent directors.

Words from our clients

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Civil Litigation Client

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Civil Litigation Client

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Why acting quickly is essential when dealing with claims against directors

Time is a critical factor when pursuing claims against directors. Delaying action can jeopardise your chances of recovering what is owed or holding directors accountable for misconduct.

Preserving evidence

The success of a claim often depends on the availability and quality of evidence. Company records, financial documents, and communications can provide the foundation for proving misconduct or breaches of duty.

However, these records may be destroyed, lost, or manipulated if action is delayed. By moving swiftly, we can secure this evidence before it becomes inaccessible.

Preventing asset dissipation

Directors who anticipate legal action may take steps to shield their assets from creditors. This could include transferring property, liquidating personal investments, or hiding funds in other jurisdictions.

Acting quickly allows us to investigate the director’s financial position and take measures to prevent the dissipation of assets, such as seeking freezing orders from the court.

Complying with legal deadlines

Claims against directors are subject to strict statutory time limits. For example, claims related to wrongful trading or breaches of duty must often be initiated within specific periods after a company becomes insolvent.

Missing these deadlines could prevent you from pursuing a claim, regardless of its merit. Our solicitors ensure that all necessary steps are taken within the required timeframes.

Maximising recovery opportunities

Early intervention can increase your chances of recovering debts or damages. It allows us to engage in discussions with the director, their representatives, or the insolvency practitioner at a stage when solutions may still be negotiated. The sooner we act, the more options we have to achieve a favourable resolution.